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Macs made in USA could jump-start American manufacturing

When Apple CEO Tim Cook told NBCâs Brian Williams the
company plans to make one of its Mac lines in the United States next
year, he offered an early glimpse of what the return of American
manufacturing will look like. It bears little resemblance to a
20th-century factory floor.

â[It] likely means a few hundred new
jobs,â said Peter Misek, managing director of technology research at
Jefferies & Co. âIt's a big start and show[s] the wage and
productivity gap with Asia is closing.â

While
it might be a big start, even hundreds of jobs wonât move the needle on
unemployment. Whatâs promising is the idea that Appleâs
multimillion-dollar investment will spark demand for a more
close-to-home supply chain that could have a ripple effect.

âItâs
possible they might do chip production here. Theyâre more and more
involved with designing their own processors,â said Jason Dedrick, an
associate professor in the School of Information Studies at Syracuse
University.

Cook said that some components â like the processor
and the glass for the iPhone â are already made in the U.S. âThings like
circuit boards, batteries, displays, chips â any of those could
potentially be made here,â Dedrick said. âApple has a lot of control
over their supply chain. They tend to dictate where and how things are
done by their suppliers.â

Although Cook didnât comment on which
computers or what elements of manufacturing and assembly he was talking
about, analysts say itâs probably going to be the iMacs that are sold in
the United States.

Apple sold roughly 4.7 million Mac desktops
-- which includes iMac, Mac mini and Mac Pro -- in fiscal 2012,
according to its annual report, and about 40 percent of the companyâs
business is domestic. This adds up to a relatively small footprint,
which would make sourcing both American labor and components easier.

There
are also shipping costs to consider. âThe iMac is one of the biggest
products they make, so manufacturing and assembling in the United States
would save them a lot on air freight or shipping,â said Stephen Baker,
consumer technology analyst at the NPD Group.

The work Apple plans
to do in the U.S. wonât just be final assembly â a crucial distinction,
said Martin Sullivan, chief economist at Tax Analysts. âManufacturing
is much more labor-intensive than assemblyâŚ The big thing to me is the
number of jobs and how much those jobs pay,â he said. For Apple, this
translates to a better shot at getting tax breaks from municipalities
where its facilities are located.

There are other business reasons
why the United States is increasingly attractive as a manufacturing
site. Itâs getting more expensive for companies to manufacture goods in
China. The rising price of energy â both to power the Chinese factories
as well as to ship the finished goods to the U.S. â erodes the benefit
of a cheaper labor force. And Chinese wages are rising, too, which
narrows the advantage further.

Apple wonât need to rely on a vast
labor force both because the product line is small and because this
type of manufacturing relies much more on sophisticated robotics,
Dedrick said.

Aside
from requiring fewer people, another difference in the rebirth of
manufacturing is the prominent role of China. Cook told Bloomberg that
Apple would partner with other companies on its American manufacturing,
which most likely means Foxconn, Baker said.

âYouâre going to
guess it would likely be Foxconn. Thereâs no reason to think they
wouldnât help Apple set up some kind off assembly line manufacturing in
the U.S.â Foxconn has facilities in Houston, and a spokesman told Bloomberg Businessweek it plans to expand in the United States.

Apple
weathered criticism following worker suicides at Foxconn factories in
China, and the boost American-made computers would give its brand equity
is something the company probably also took into account when making
its decision, said Sullivan.

âItâs going to give them a lot of
positive press and inoculate them from all the negative publicity
theyâre getting so far,â he said.

The move also puts Apple back in
the position of being the standard-bearer for re-imagining the future, a
move that could please investors in light of the recent slide that
brought the stock to a nearly four-year low. On CNBC, UBS analyst Steve
Milunovich said Appleâs revenue is hitting a peak as the categories it
dominates mature, even as he praised Cookâs ambition.

Likewise, manufacturing in the United States, once given up for dead, has shown other signs of life recently. Reuters reported that Boeing plans to ramp up output by 25 percent
over the next year and a half, and auto sales rose 15 percent in
November. In a statement responding to Appleâs news, the Alliance for
American Manufacturing referenced a âgrowing list of major manufacturers
that see the United States as an attractive location.â

It wouldn't surprise me. The quality of manufacturing over there is crap, but companies could afford the waste of items that didn't pass QC enough to ship because labor was so cheap. As wages there go up that will no longer be the case.

Also I believe that we are going to see a huge rise in the popularity of "made in America" again.

Quoting JakeandEmmasMom:

It wouldn't surprise me. The quality of manufacturing over there is crap, but companies could afford the waste of items that didn't pass QC enough to ship because labor was so cheap. As wages there go up that will no longer be the case.

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